Since 95 per cent of Lynchem's products go to exports to leading pharmaceutical customers in Europe, North America and Japan, it made good sense for Degussa, which already had a presence in China in other fine chemicals since 1988, to enter into a joint venture.
The German firm aims to triple its volume of business in this attractive growth region to €900m by 2008, acquiring Chinese companies - it already owns 23 - and integrating them into its global production infrastructure and marketing network.
With the new company, Degussa Lynchem, the manufacturing of on-patent intermediate and API steps, off-patent APIs and other special chemicals will be cheaper, but will also offer more Asians customers access to the technologies available at Degussa's European sites.
"A lot of cost-competitive manufacturing takes places in Asia, so this deal builds on Degussa's successful record in China," Degussa spokeswoman Hannelore Gantzer told In-PharmaTechnologist.com.
"Customers will now be provided with better services and solutions, but served from one key contact."
Degussa says it sees Lynchem as a cornerstone for the implementation of its Asia strategy, linking market proximity and innovative prowess.
It will acquire 51 per cent of Lynchem, with the remaining 49 per cent held by the current owners.
The Chinese firm was established in 1995, employs 1,200 people and has a reactor capacity of more than 800 cubic metres in a 50-hectare facility in Dalian/Liaoning Province.
"Lynchem has been a pioneer in promoting and developing in China the custom-manufacturing of intermediates and good manufacturing practice (GMP) regulated products for the world markets," said Yuncai Wang, founder and majority shareholder of Lynchem.
"The partnership with Degussa, well known as a leading player in exclusive synthesis, will result in a competitive advantage for the new joint venture and we are pleased to have attracted such a strong partner."